The Economics of a Living Wage

Rick Wartzman's weekly column in the LAT business section is focused primarily on the economics of the living wage deal in LA.

In addition, the new legislation would establish rigorous requirements that the city must follow if it wants to extend the living wage (heretofore reserved for municipal contractors) to other neighborhoods or industries. Business leaders say the upshot will be to halt the living wage from spreading any further. "This is a major point," says Gary Toebben, president of the Los Angeles Area Chamber of Commerce, sounding as if some terrible cancer has finally stopped metastasizing.

Big business views paying their workers a living wage as a "cancer". They are often short sighted thinkers when it comes to the actual economics of paying a living wage. Paying workers more leads to a higher quality workforce and less turnover. It is something on of the LAX hotel owners touched on. He was the only one to voluntarily pay his employees a living wage:

The common refrain among businesses is that any mandated boost in wages will trigger a lot of layoffs. But the truth is, economists are divided on this. Considerable evidence exists that job losses from past increases in the minimum wage have been negligible, if that. What's more, business owners may even discover some pluses from increasing compensation.

Gallegos has. For starters, he says, elevated wages translate into a more stable labor force. Although American Property Management doesn't offer $10.64 or more to workers at all of its hotels, Gallegos says those at the Four Points deserve it because of L.A.'s high cost of living. More generally, the company prides itself on out-paying the competition wherever it operates. The result, Gallegos says, is that its turnover is less than half the industry average, and the company attracts better talent.

Beyond that, he finds a direct correlation between higher employee wages and higher customer satisfaction: "If you treat your people right, they're going to treat the guests right."

It is a win all around. Workers get paid a living wage, they feel valued at their workplace and are less likely to leave for greener pastures. The guests get better service and the owner reaps the rewards.

Nevertheless, the Chamber continues to fear that this "cancer" of paying a living wage will spread beyond the hotels. The City Council is still ironing out the details and while nothing is set in stone, they seem to be moving to leave the door open for further expansions.

But word inside City Hall is that the language being drafted won't be so cut and dried. It will keep open the possibility of expanding the living wage — as long as proper steps are taken to assess the economic effect of such a move. My hope, in fact, is that the fight at LAX prompts a robust debate over whether some kind of living wage should be imposed throughout L.A., as it has been in San Francisco, Washington, Albuquerque and Santa Fe, N.M.

It is my hope, as well, that this debate will spread all over the state and beyond. We need to discuss the moral implications of paying an unlivable wage. We need workers to continue to tell their stories. We need to continue building alliances and public support.

We know that there is support here in LA, our poll proved as much. We can use this victory to build for others.